Matt McKinney was a data science executive at Uber and helped launch Uber Freight with software engineer Shaosu Liu.
One of the biggest problems the couple saw there was that while they were able to grow sales, they found it difficult to grow profits because they “lost a ton of money” through bad debt and late payments. .
When digging to understand why, the duo realized that “there is so much complexity in a single bill of lading.”
They found out that 20% of all freight invoices contain an error. They also found that it takes an average of 50 days process and pay one invoice.
“A lot of people in this industry aren’t like Uber — they don’t have 250 engineers working on problems to fix this,” explains McKinney. “So Joe’s Trucking in Cincinnati, Ohio, for example, probably has very similar billing and payment issues as Uber Freight.”
In their conversations with about three dozen shippers, carriers and brokers in the industry, McKinney and Liu kept hearing the same thing: “It’s hard for us to get paid and it’s hard for us to pay.”
“So as an entrepreneur, when you hear that pain described so vividly and literally 35 different times, you actually know that the pain is your chance to build a product that doesn’t exist on the market,” he told londonbusinessblog.com in an interview. .
So the pair spent nights and weekends building a prototype for Loop, a startup that is at the intersection of logistics and payments, before leaving Uber in May 2021 to focus on the business full-time. Shortly after, they raised a $6 million seed round co-led by Susa Ventures and 8VC. And earlier this year, they raised a $24 million Series A round led by Founders Fund. Neither financing has been announced publicly before.
During their exploratory phase, three of the 35 companies – unnamed large companies – they spoke to told them that if they built a tool to solve the problem, they would help test the prototype and be its first customers. . Since then, the company has developed open APIs that it says will “streamline data recording and shipping document capture.”
More specifically, the company said it uses natural language processing (NLP) and computer vision to digitize workflows and reconcile payments and that its technology “captures the lack of standardization and is able to extract data from a variety of document types and data sources to validate invoice accuracy, so that invoices and payments can be settled in near real time”, or even to real-time, depending on when the user wants to release their funds.
Loop goes so far as to claim that its technology can reduce the lag time between when an invoice is received and paid from 50 days to 3 days, as well as reduce invoice errors to “nearly 0%”.
The startup’s target audience is shippers who produce or distribute goods (such as Walmart, Pepsi, Coca-Cola and Nike). They may also work with brokers, or 3PLs, who mediate a transaction between a truck driver and a shipper.
Loop launched its product offering in March and made $25 million of booked total payment volume in the first month. Today, it does over $1 billion in total payment volumes.
Image Credits: Loop
One of the tailwinds that helped Loop, McKinney believes, is the secular shift from paper to electronic payment methods caused by the COVID pandemic. Also, geopolitical issues and the pandemic exposing vulnerabilities in the global supply chain have led to a rise in freight costs, meaning shippers are “seeking all ways to cut costs,” he said. The aim of Loop is to help these companies minimize costs and operate more efficiently. And, claims McKinney, it can drive down payments
Loop makes money by taking a percentage of the total payment volume. It is a fixed percentage based on level, and as a company increases the levels, the percentage they pay decreases. A consumption-based revenue model was important to the couple, McKinney told londonbusinessblog.com.
“We want to align incentives so that if you take value out of the product, you’ll use it more,” he said. “And that’s how we should be paid.”
The company today has 35 employees, with engineers coming from Uber, Google, Meta and Flexport. A Flexport senior software engineer even emailed Loop about a job. When he told Ryan Peterson, founder and then CEO of Flexport that he was leaving for Loop, Peterson reached out.
“He said, ‘You just stole one of our No. 1 engineers,'” McKinney said. “I want to know what you do and I want to invest.” And he did.
Uber co-founders, Garrett Camp, through his venture firm, Expa, and Ryan Graves, through his family office, Saltwater Capital, also show no hard feelings in supporting the company. And more than 10 of Loop’s 35 employees came from Uber. Other investors include FourMore Capital, Lineage Ventures, Nichole Wischoff, 9Yards Capital, McVest Co, Mark Pincus and OEL Ventures.
“We simplify logistics payments, but we also generate data and that data, and the quality of the data is also what sets us apart from a lot of the competition,” McKinney said.
Founders Fund client John Luttig, who led the Loop investment, told londonbusinessblog.com via email that his company was drawn to the startup because it uses a tech-first approach to eliminate friction for all parties in the supply chain “while competitors simply send more people to the company.” the problem.”
“As the domestic logistics renaissance continues and more companies look to bring back U.S. manufacturing, Loop’s technology will only become more valuable,” he added.